Who'd want to be an airline boss right now?

What sort of company would you least like to be running, during the current economic downturn?

Apart from the astonishingly high level of job security, banks come pretty low on my list: not only do bank executives now have to grapple with horribly complex financial structures they have never properly understood but they are carrying the can for at least some of the problems that got us into this mess in the first place.

Retailers? It looks brutal out there on the high street but I suppose the shopping opportunities might be some compensation, given the right employer. Housebuilders? No comment.

Unattractive as all these options are, none of them gets my vote. No, in my view the airline industry takes the biscuit. T

he sector is extremely vulnerable to high oil prices and economic weakness - both factors which are outside the airlines' control and hard to predict. Either one of these on their own is a problem. Here comes the double-whammy.

It's not that the sector hasn't weathered adverse conditions before. Its history is one of frequent crises, which it often comes through surprisingly well. This looks worse.

Geoff Dixon, boss of Qantas, the Australian carrier, predicted in a speech on Tuesday that the industry now faces "not a shock or a blip - not even a crisis - but a permanent transformation".

Suddenly, I can see why larger-than-life figures such as Ryanair's Michael O'Leary end up running airlines. Such abnormally high levels of drive and confidence would seem excessive in any other walk of life but must, I imagine, be vital just to enable airline chiefs to get out of bed in the morning.

So far this year, airline stocks have underperformed but they haven't suffered quite as badly as other struggling sectors. Partly, this is because they have been somewhat protected by hedging, which has until recently mitigated the impact of the oil price surge.

British Airways shares are down about 20pc in the year to date, Ryanair 29pc and easyJet 45pc - grim but not as dire as the showing by the likes of Bradford & Bingley, down 77pc, Marks and Spencer, 53pc and Taylor Wimpey, 73pc.

Unlike the banking sector, where trouble has been brewing for a while, last year was the peak of the cycle for airlines. Planes were nearly full, and the oil price was about $75 a barrel. This year the picture is very different. Oil has become the biggest cost for airlines, now accounting for 30pc-40pc. Airlines have been cutting flights, routes and jobs.

The general rule of thumb is that at around $120 a barrel, airlines drift in and out of profitability. Above $140 a barrel, airlines burn cash.

How hard they have been hit so far partly depends on how extensively they had hedged their fuel costs. Air France and Lufthansa still have a big slab of their oil costs hedged but even the more conservative hedgers will suffer when their protection runs out in the next year or so.

So, does the recent fall in the oil price to around $125 a barrel help? A bit, but not that much. Firstly, there is no evidence that the price has stabilised, and secondly it is still an awful lot higher than the historic cost of oil for the airline industry.

Mr Dixon of Qantas believes expensive oil represents a structural change: the cost of finding and extracting oil will continue to climb, so a dip here or there in the price is pretty much beside the point. The additional cost of fuel this year for Qantas, for example, represents more than its projected profits before tax for 2007-08.

"By further cutting other costs and by increasing our fuel efficiency, we can reduce somewhat the need for a rise in fares to compensate but we simply cannot offset the full amount."

Yesterday, easyJet said in its interim statement that over 50pc of its full year fuel cost increase has been offset. That is enough to keep things more or less on track for now but offsetting high oil costs is likely to become increasingly difficult for all airlines. Adding to the problem is the fact that many have been busily ordering new planes during the good times.

This is the real Catch 22 for airlines. Generally, demand for flights grows in line with the economy and consumer expenditure. In the leisure part of the market, volume also rises as prices are cut. So airlines, by reducing costs and pruning fares, have been able to stimulate growth. They have been doing so for years.

What happens now, though, when higher costs from oil, which cannot be allayed, force prices to rise just as the economy is weakening?

The answer is consolidation. Mr Dixon believes there will be a new aviation world order - in other words, the bigger airlines will buy up the smaller weaker ones. In fact, this is the best hope for the stronger airlines, as it is the only realistic way to shrink the industry rapidly enough.

The more painful alternative will be that the weaker companies struggle on, holding capacity at uneconomic levels for longer.

The airline industry is still extraordinarily fragmented. Barriers to entry are low but barriers to consolidation, in the form of national interests and regulatory issues, remain disturbingly high. In the European short-haul market alone, Collins Stewart identifies 84 airlines with a total of 3,046 aircraft but 12 of those airlines - including Air France, BA, easyJet and Ryanair - account for more than 50pc of capacity.

So it doesn't take a genius to work out that, one way or another, the number of airlines will shrink. The process, I suspect, will be a slow and painful one.

In the meantime, I have another worry. On an almost daily basis, I get an email from Ryanair's public relations people lambasting some poor fool or another.

Regulators, air traffic controllers and airport operators are frequent targets - gems such as the airline's call for the dismissal of the Irish aviation regulator or its demand for a reversal of "this idiotic decision by PANSA (Polish air traffic control) which is set to stifle economic development".

I am now bracing myself for an email bemoaning the imbecilic views of the woman from the Telegraph. Well that's just part of my job, I guess - I still wouldn't swap places with an airline executive.